Without prejudice to any liability incurred under the provisions of this Act or any other law for the time being in force, where a company is required to re-state its financial statements due to fraud or non-compliance with any requirement under this Act and the rules made there under, the company shall recover from any past or present managing director or whole-time director or manager or Chief Executive Officer (by whatever name called) who, during the period for which the financial statements are required to be re-stated, received the remuneration (including stock option) in excess of what would have been payable to him as per restatement of financial statements.
Legal Commentary & Landmark Judgments: Section 199
Section 199 enacts a statutory clawback mechanism requiring companies to recover excess managerial remuneration paid to current or past executive leadership whenever financial statements are restated due to fraud, misstatement, or non-compliance.
When a company restates accounts following an audit qualification or NCLT order under Section 130, immediately quantify the delta between historical executive remuneration and the restated Section 198 ceilings. Issue formal clawback demand notices under Section 199 against former MDs and CEOs; if unpaid, initiate summary recovery proceedings before the commercial court or NCLT.